CDP vs. Custodian Accounts in Singapore: Which One Should You Trust with Your Investments?

Moomoo is currently running an exciting promotion, especially if you are interested in reorganizing where you want to custodise your securities. If you hold local securities in your CDP account and would like to transfer them to Moomoo SG, then this promotion is most suitable for you.

By completing a one-time transfer of securities from your CDP account to your Moomoo SG universal account, you can earn different tiers of gifts:

This means that the reward that you can get depends on the value of the securities transferred in. You must maintain the securities in that account for 90 days to qualify for the rewards.

This deal is only valid for the new/existing Moomoo SG users who have never transferred funds from other brokerages to Moomoo SG, have never transferred funds from Moomoo SG, or have participated in the previous transfer-in event.

Moomoo SG will subsidise your transfer fee to facilitate the CDP transfer, capped at S$200. You will first carry out the transfer to Moomoo SG. Upon successful completion, please send a request to their client service team with your statement of account of the outside broker for the transfer fee. Moomoo SG should then issue cash coupons as the subsidy for the transfer within 15 days.

Why Should Your Custodise Your Securities Under Moomoo SG?

You would most likely think deeper about why you should choose to trade and custodise your securities on another platform rather than just be swayed by the cash coupons.

One of the most popular custodians in Singapore happens to be the CDP. CDP stands for Central Depository (Pte) Limited. It is a depository service for a wide range of products, mainly for the Singapore market. CDP is wholly owned by SGX, the company that owns the Singapore stock exchange.

For those like me who invest in individual shares or ETFs listed in Singapore, we have grown to trust the CDP. Many of us trust the CDP because if something bad were to happen to it, we think the Singapore government would do something about it.

We also tend to trust the conservatism of our Singapore government entity more.

The shares held in the CDP account are also under your name, as opposed to the shares under the broker’s name. This ownership may become an issue if there is fraud, and the firm administering the settlement cannot determine who owns what as the assets are commingled.

The Two Drawbacks of Using a CDP Account

While we favour the CDP’s security aspect, CDP has its drawbacks.

Firstly, trading securities stored in CDP costs more in trading fees. There is typically a minimum commission (about $25) charged. If your capital is low, this minimum commission will be a larger percentage of your trade. I understand there is a minimum commission likely because of the cost levied on the brokers to use the CDP custodial services.

At some point in the past, the same local brokers started offering cheaper commissions with no minimums if you were willing to transfer the custodial of your securities to the broker.

Secondly, you are limited in the degree of financial banking flexibility you can perform if your securities are custodise under CDP.

For example, if you have custodise your securities under Moomoo SG if you sell a specific stock, you can immediately send it to your Moomoo Cash Plus, which is currently earning a yield-to-maturity of 3.42% (SGD, subject to change) (Fullerton SGD Cash Fund yield as of 22/08/2024).

If you wish to invest in a local stock, you can immediately redeem your Moomoo Cash Plus and the money is readily available for you to purchase the stock.  

Trading Singapore stocks using moomoo has an additional benefit in that there is currently zero commission*.

Lastly, you can only custodise locally listed securities in the CDP account. You may be a fan of the secure peace of mind brought by an SGX-affiliated entity, your international securities will have to be custodise in other places. If you have a philosophy that you need to invest in businesses that is not Singapore-listed, you would have to make peace with the idea of holding your securities with another safe custodian.

Ultimately, you need a good reason why you wish to consolidate your shares into Moomoo SG and that can be:

1. Low commissions, custodian charges, and currency conversion for the markets you prefer to trade.
2. Access to the markets you prefer.
3. Access to funds.
4. The ease to quickly reallocate your funds between various financial products.
5. An intuitive digital platform that enhances your trading experience.

Moomoo SG as a Custodian for Your Shares.

Would Moomoo SG be a broker that you feel safe enough to hold the securities important to your family? I think it is perfectly rational for us to consider this.

I believe there is a list of criteria we should evaluate a custodian with.

Firstly, how is the protection in the area that the broker operates in? Moomoo SG currently operates in Singapore, so it falls under the regulatory framework of the Monetary Authority of Singapore (MAS).

MAS requires brokers operating in Singapore to adhere strictly to a set of rules. These rules include segregating customers’ money and assets, providing statements of accounts to customers, and providing the best trade execution to customers.

Thus, Moomoo SG must comply with these rules, as well as the anti-money laundering and countering terrorism financing requirements.

Moomoo Singapore currently holds a Capital Markets Services License (CMS), a Major payment institution license with Exempt Financial Adviser Status. They are also an admitted Clearing Member, Trading Member, and Depository Agent of the CDP.

To be admitted as a Clearing Member of the CDP, Moomoo SG have to meet the following requirements:

The criteria as a Trading Member of CDP is almost similar, so I won’t list them out.

As a financial entity regulated by MAS, Moomoo SG have to ensure that their operations and accounting to be in tip-top conditions because they can be audited anytime.

MAS’s criteria ensures that there are layers of security measures to ensure:

1. Big blow-ups are more contained.
2. If they still happen, the financial entity has already set aside reserves to alleviate the situation.
3. And if they become big enough that #1 and #2 both happen, there are so much order placed in the entity to adhere to that winding down and take over can be more orderly.

Secondly, the financial statements of a broker reveals to us different aspects that are crucial as a custodian:

1. The revenue shows us how they generate the income, which may allow us to see their market position and its ability to attract and retain client.
2. A consistent profitable company shows whether a company can effectively manage the costs to create value for shareholders.
3. The working capital will show their management of liquidity and ability to meet short-term obligations.
4. A positive free cash flow shows a good sign of liquidity and financial stability.

While I do not have access to the financials of Moomoo SG to assess their profitability, we have the next best check which is how their parent is doing. In how well run is Moomoo’s parent Futu Holdings, I covered what we can deduce from their financials.

Futu Holdings has remain profitable, with a healthy gross margin, a positive net cash from operations and a very low net debt-to-asset ratio.

The strong regulatory framework helps to deter, and the public financial statements help us detect chinks in the armor. That does not mean trouble cannot befall a custodian like Moomoo SG. We just hope that by then, things can be properly handled.

Here’s How to Transfer

Moomoo SG has made it easier for you to transfer your shares from CDP to Moomoo.

You can start the process by going to the Accounts and the Transfers tab. There, you can select Transfer Stock In.

Under common brokerages, select Central Depository Limited (CDP).

Since you are transferring securities from your CDP accounts, you will need to E-sign the transfer form and then upload your ID for verification.

You can read more about the CDP Transfer here.

If you have not signed up for an account with Moomoo SG, you can consider signing up now and try out their platform to get welcome rewards up to S$1034*.

I will help you break down what you need to do and the rewards that you can earn below:

You can use my moomoo referral link here. You can only get the S$20 cash coupon if you deposit S$100, maintain the money for 30 days, and complete the buy trade through this Investment Moats link.

All views expressed in this post are the independent opinions of Investment Moats. Neither Moomoo Singapore nor its affiliates shall be liable for the content of the information provided. The Monetary Authority of Singapore has not reviewed this advertisement.

*T&Cs and other fees apply. Please refer to the link for latest promotions. Any past performances indicated does not guarantee future performance.